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HomeMy WebLinkAbout2000-09-28 - Agendas - FinalFIRE PENSION AND RELIEF FUND AGENDA SEPTEMBER 28, 2000 A meeting of the Fire Pension and Relief Fund Board will be held on September 28, 2000 at 11:00 a.m. in Room 326 of the City Administration Building. 1. Approval of the minutes 2. Approval of the pension List 3. Old Business 1. Wayne Watts 4. Investment Report 5. 1999 Actuarial Valuation 6. Other Business • • • • MINUTES OF A MEETING OF THE FIRE PENSION AND RELIEF FUND BOARD • AUGUST 31, 2000 A meeting of the Fayetteville Fire Pension and Relief Fund Board was held on August 31, 2000 at 11:00 a.m. in Room 313 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. APPROVAL OF THE MINUTES Mr. Pete Regan moved to approve the minutes. Mr. Ronnie Wood seconded the motion. Upon roll call the motion carried unanimously. PENSION LIST Ms. Woodruff stated $340.00 was now being deducted from Roy Skelton's pension check. The deduction was ordered by the court. Mr. Reagan stated he did not believe it was the board's responsibility to do that. The added the State Statute stated that only the beneficiaries of the plan received payment. Mayor Hanna suggested that the ask Mr. Rose, City Attomey to get an Attomey General's opinion. Mr. Reagan stated it was putting the burden on the Board, when the burden was on the retiree to pay it. Mayor Hanna suggested that they ask Mr. Rose for a legal opinion on the legality of the pension board paying directly from the fund. They needed to make sure that they were not violating a State Statute. Mr. Reagan moved to approve the pension list. Mr. Darrell Judy seconded the motion. Upon roll call the motion carried unanimously. INVESTMENT REPORT Mr. Richard Yada, Merrill Lynch, stated they were a little below where they were at the end of June. They had just gone over the thirteen million dollar mark by two thousand dollars on June 30, 2000. July they were down a little bit. The Private Portfolio Group was a t $2,864,000. They were up 6.92% this year. Which was good compared to the Dow which was down 7.68%. The S&P 500 was down 2%. The Private Portfolio Group was out preforming the market. Mercury Group was at $2,334,273. They were up 4% for the year. They were also out preforming the stock market. Income Account was at $5,222,308. For the year they were up 4.41%. The value of that would be higher, but they had transferred $25,000 in the month of July to their checking account to pay expenses. They were holding their own. The Bond market was • • Fire Pension Minutes August 31, 2000 Page 2 up. Ashland was the only one struggling right now. $2,503,992. They were down 5.67%. The total as of yesterday was $13,233,000. The equity market was going up. They were at 55.3% in equities. Their investment policy called for 50% equity. They had talked about increasing the equity portion of their portfolio for about the last year They had temporarily approved the asset allocation last week. He would like to change the investment policy to a maximum 60% equity. It did not mean they were going to get their, but they would like to have that flexibility. The altemative would be to sell some of their equity and to put it into fixed income. He did not believe that would be good for the long term. His recommendation would be to increase the equity portion from 50% to a maximum of 60%. Mr. Reagan moved to change their asset allocation from 50% on the equity side to a maximum of 60%. Mr. Ronnie Wood seconded the motioii. Upon roll call the motion earned unanimously. Mr. Yada stated they had discussed with Mr. Maguire the reduction of fees. They were looking to see where they could reduce their fees without reducing the amount of services, performance and the quality of managers that they have. Mr. Reagan stated he would like to see a graph or chart of the per year total costs have been to • the fund since their beginning in 1986. • Mr. Yada asked if we had received our actuary yet. Ms. Woodruff stated Catherine Hinshaw had not received them yet, but thought they we should receive our copy the middle of next week. WAYNE WATTS Mayor Hanna stated there was a request from Mr. Wayne Watts attorney requesting Ms. Jeanne Kay Watts be paid directly from the pension fund. Mr. Reagan explained Mr. Watts was unable to take care of his affairs and his sister Ms. Jan Judy was having to take care of things. Mr. Reagan moved to deduct $272.50 per month from Mr. Wayne Watts pension check and to pay Ms. Jeanne Kay Watts directly. Meeting adjourned at 11:30 a.m. SEP 28'00 11:12 FR MERRILL LYNCH • 501 22B 7431 TO 15015758257 P.01/01 o e n en b �� X 0 r ,� �r1 o5 .O.. Q\ Q N r` a R C N• On.; p. N i:'. c p M VD U M e �Nl. 1`1 r1 V- w.1; N ti.: b :1`. O ;y: co N N Y1 N rn OC t + + +:,- + + + a. .. I OD ?if ... C.: itt 0 0 b c r` o 47.1 CO CN in in c N — . r N b W h .cvi —. • c: r.., is • '.8 X n ^.a eta �..r- x r,.g N tri r. - . in 'b .�a. ing „� oo x- m a:017i N —� , .� ,'rte r,1 : + + + + }5: t �a ( + N 1.0 m M ..e:1 o' OC enR 1`rifn N + t 's a C ."1 ".- 00 < .N+ ii ,Q9.. 08 8 8 os 00 X 0 0 Orig. Investment 88p n.1 ** TOTAL PAGE.001 ** Divisions Administration 1-501-371-2620 1-501-371-2629 Fax i n s u ra n ce.Ad m i n i s t ra t i o n© mail.state.ar.us Accounting 1-501-371-2605 Insura nce.Accounti ng© mail.state.ar.us Consumer. Services 1-501-371-2640 1-800-852-5494. 1-501.371-2749 Fax !n surance.Con sumers© ' mail.state.ar.us • Information Systems 1-501-371-2657 insurance•Information.Systems© mail.state.ar.us Insurance Fraud Investigation 1-501-371-2790 " 1-501-371-2799 Fax insurance.Fraud© • mail.state.ar.us Finance 1-501-371-2665 1-501-371-2747 Fax insurance.Finance@ mail.state.ar.us Human Resources 1-501-371-2815 insurance.Human.Resources@ mail.state.ar.us . Legal 1-501-371-2820 insurance.Legal© mail.state.ar.us License 1-501-371-2750 insurance.License@ mail.state.ar.us Life & Health 1-501-371-2800 insurance.L&H© mail.state.ar.us Property & Casualty 1-501-371-2800 1-501-371-2748 Fax insurance.P&C© mail.state.ar.us Risk Management 1-501-371-2690 0u ranee. Ris k.Manag ement© mail.state.ar.us Senior Health Insurance Information Program 1-501-371-2782 1-800-224-6330 - 1-501-371-2749 Fax insurance.Seniors© mail.state.ar.us Arkansas Insurance Department Mike Huckabee Governor Mike Pickens Commissioner 1200 West Third Street Little Rock, AR 72201-1904 1-501-371-2600 1-800-282-9134 -Fax 1-501-371-2618 www.state.ar. uslinsu ranee September 27,-2000 TO: City Treasurer FROM: Mike Pickens, Insurance Commissioner RE: Police Officer's Relief and Pension Fund Subsidy -1999 1 Attached is the state warrant to be credited to your Police Officer's Relief and Pension Fund (voucher number 01003 in the far left hand corner). If you have any questions on how to calculate the breakdown of your money into LOPFI or your local pension fund, call the LOPFI office at (501) 682-1745. The warrant is issued under authority of Appropriation Act 1221 of 1999. Any questions regarding the insurance premium tax collection may be directed to Connie Hagemeier or Pam Looney at (501)371-2605. Comprehensive Health Ins. Pool ("CHIP") 1-800-238-8379 ! Education Pays ! Stay In School ! ARKids First Healthcare Insurance 1-888-474-8275 FUND::. MO. DAY. YR. S'FR :09 :00 •-0-.1.0 03 42-5 0361.0.4 , YYucIAR ACCOUNT NUMBER THIS WARRANT VOID AFTER JUNE 30,2002 01E-0238693 uhitor of $tate of Arkansas To the State Treasurer, Little Roc*,Ark PAY TO THE ORDER OF: FAYETTEVILLE DO NOT BEND, FOLD OR MUTILATE 1906 Lae 1:08 200 76 781: DOLLARS *342895 CENTS •16. NB MEn ID WE BY WE 5111E R wain 10 PEKI 1N 111E 5111E TREASURER If BERRY SAID NII 10 TIC GOER OF ,IE PAYEE OUT OF ON HEREIN SPROUTED. .,• • - • • 2LO238693II. `..,'DONOT BEND, FOLD OR MUTILATE I FUND `.I'MO. .DAY. •YR SFR 09 19; 00 THIS WARRANT VOID AFTER JUNE 30, 2002 Auditor of tate of$rkansas To the State Treasurer, Little Roc Ark PAY TO THE ORDER OF: `•FAYETTEVILLE 50;1.002 4251036104 ACCOUNT NUMBER i90618» 1:08 200 76 781: FUND SFR. 09 DAY 19 YR 1:1 0 :01001; 4251036104 ACCOUNT NUMBER 01E-0238473 DOLLARS **95969 CENTS 56 Ow III n oOE'n TIE nom or EOMYOEO To IED IEIE11 010 TIE STATE n000 IS HEREBY • OY SAID OEN TO VE EWER OF•THE PAYEE WT OF • HEWED liFnf® 202384730 THIS WARRANT VOID AFTER JUNE 30, 2002 01E-0238218 uhitor of $tate of Arkansas To the State Treasurer, Little Roc Ark PAY TO THE ORDER OF: FAYETTEVILLE I DO NOTBEND, FOLD OR MUTILATE 1906 L8e 1:oa 20046781: • a*171163 DOLLARS CENTS 96 annum IS DOE .0 T. sun or OUOOLt'.R - IEnA YO.TTE n*TE DEAD= If TRIED • RID ITC to TH ODD 6 TR • YEE. on OF 21023821811E SEP 28'00 11-:12 FR MERRILL LYNCH N O d Rim CS rn aa' ^ cm co a. Cl to• 0. o d o V 4.1•eel 501 228 7431 TO 15015758257 P.01/01 oenh t;y O ` kn .moi in.! co N. 1. M M— til; N „y :'O .n: o +;t:Y},. en 4 No. oo h VWi 00 el ei T.44 N Q N O� 'ri' CV 'va. N1:1N N CiN e x cm] .. ON v,R. h iT a7 co N h rMi p 91 C v N ^� Mh b OO C4 •OC M M : f` h N + + t + };. 00 0O% ' o WIN at In i o. C O. , 0 '0.y/ E . C7 . . 0 ;,;.. yOOOo 0 W c4ct 19: t. o.ftc --0..,-°: ..1::".i..611::?:11:' 16 1.65 tra M .-1 IDE M V on L O E+ y- „ .:75. Obi O E a - ctl O 1:1 - vi `� C {. too, oo C•1:ste ` rn + RrG R : rel h Qi N M Q V1 .-7 Yjy;' U ; n a 0 1ti: ^ o 0 elci -` - o m N O,- ': o S `n m 0 to ;250 4 • 8 en t 2 is ti.? CO go 0 o O Cn pp .Ni bs�UoO ter ** TOTRL PAGE.001 ** 01 • /277i0 • 1111=:9dda, ARKANSAS FIRE & POLICE PENSION REVIEW BOARD P.O. DRAWER 34164 LrrnF Roar, ARKANSAS 72203 TE.EPNONE (501) 682 -1745 FAX (501) 682 - 1751 email: iMo@lapf pzb.00m website: wwwiopfi prb.com TO: The Board of Trustees Fire Pension and Relief Fund of FAYETTEVILLE FROM: Arkansas Fire and Police Pension Review Board RE: 1999 Pension Fund Actuarial Valuation DATE: September 13, 2000 In accordance with State law, the actuary under contract to this office periodically tests all local fire and police pension funds for actuarial soundness. The 1999.actuarial study of your pension fund is attached. The financial tests for the pension fund are to answer the following questions: 1. Is there enough annual income to the pension fund to fully fund it? (See page 4 of the actuary's report.) 2. Are there enough assets in the pension fund to cover all active member contributions, all payments to current retirees, and at least 85% of future payments earned by active members (See page 11 of the actuary's report), OR are current assets sufficient to cover 94% of all accrued actuarial liabilities (See page 10 of the actuary's report). 3 Is this pension fund considered actuarially sound under State law? • RFrr)\IED SIP 9'4 2000 CITY Cui.-14 , OFFiOE YES NO x x x 1 • FAYETTEVILLE FIREFIGHTERS PENSION FUND ACTUARIAL VALUATION AS OF DECEMBER 31, 1999 goOsborn, Carreiro & Associates, Inc. ACTUARIES • CONSULTANTS • ANALYSTS 1 1 1 1 .1 N 1.. i • 1 September 11, 2000 Board of Trustees Fayetteville Firefighters Pension Fund Gentlemen: One Union National Plaza,Suite 1690 124 West Capitol Avenue Little Rock, Arkansas 72201 (501)376-8043 This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville Firefighters Pension Fund as of December 31, 1999. This valuation is required by Arkansas Code Annotated 24-11-205. The purpose of this report is to (1) evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed, (3) review the development of the Fund over the past several years, and (4) present certain actuarial items on page 9 for disclosure under Governmental Accounting Standards. This report is not intended for any other purpose. The member and financial information used in this report was supplied by the Arkansas Fire & Police Pension Review Board, whose cooperation is appreciated. We did not audit this information, although we did review it for reasonableness and consistency. I certify that this report has been prepared in accordance with generally accepted actuarial principles and practices. In my opinion, the actuarial methods used are appropriate and the actuarial assumptions produce results which, in the aggregate, are reasonable. - Sincerely, 04, Steve Osborn, F.S.A., M.A.A.A. Actuary EXHIBIT 1 EXHIBIT 2 EXHIBIT.3 EXHIBIT 4 EXHIBIT 5 EXHIBIT 6. EXHIBIT 7 EXHIBIT 8 TABLE OF CONTENTS CONTRIBUTIONS COST AND LIABILITIES SUMMARY OF FINANCIAL INFORMATION COMPARISON WITH PRIOR YEARS SHORT CONDITION TEST EMPLOYEE AND RETIREE PROFILES PRINCIPLE PROVISIONS OF THE PLAN ACTUARIAL METHODS AND ASSUMPTIONS • 1 EXHIBIT 1 CONTRIBUTIONS The following contribution level reflects the payment of the current year Normal Cost for benefits attributable to said year (see Exhibit 2) plus an amount sufficient to pay off the Unfunded Actuarial Liability over a 8 -year period (5 -year period for any unfunded retiree liability). These costs DO NOT include the contributions due to the Local Police and Firefighters Retirement System ("LOPFI") for persons hired after 1982. 2000 Necessary Annual Contribution to pay: 1 Normal Cost, plus 2 Pay off the Unfunded Actuarial Accrued Liability 3 .Total necessary Less 4 Expected Employee Contribution (6.00% of salary. $12 per active volunteer) Necessary Employer Contribution (This is the amount needed in addition to investment income) Covered Payroll Necessary Employer Rate Full Volunteer or Paid Part -Paid Total $ 138,448 5 0 $ 138,448 80,898 0 80,898 $ 219,346 $ 0 $ 219,346 22,031 0 22,031 $ 197,315' $ 0 $ 197,315 $ 367,188 N/A $ 367,188 53.74% $ N/A 53.74% These contributions assume that the dollar contribution grows at a rate of 4% per year. The contributions are assumed to be made continuously throughout the year. The actual 1999 contribution was 5514,019 from the employer. .10,4 1 1 I 0 1 1. 1 1 1 • 1 EXHIBIT 2 COSTS AND LIABILITIES A Normal Cost (Cost to fund current active members) 1 Regular Retirement Benefits 2 Voluntary Termination Benefits 3 Survivors' Benefits 4 Disability Benefits TOTAL B Actuarial Accrued Liability 1 Active Lives Regular Retirement Benefits Voluntary Termination Benefits Survivors' Benefits Disability Benefits TOTAL ACTIVE LIVES 2 Deferred Retirement Option DROP Accounts Future DROP Payments & Pensions TOTAL DROP 3 Inactive Lives Retirees Disability Retirees Widows &Children TOTAL INACTIVE LIVES 4 Total Liability C Assets D Unfunded Actuarial Accrued Liability 5 December Dollar Amount $ 128,798 3,100 3,096 3,454 $ 138,448 $ 2,920,335 0 1,065 2,261 $ 2,923,661 $ 536,713 3,602,298 $ 4,139,011 4,750,833 622,995 504,343 5,878,171 12,940,843 12,352,475 588,368 31, 1999 Percent ofpav 35.08% 0.84% 0.84% 0.94% 37.70% 1 EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION (Items D -E, and G determined by Osbom, Carreiro and Associates, Inc.) Year Ended Year Ended Year Ended A. INCOME 12/31/1997 12/31/1998 12/31/1999 1 Contributions Employee $ 44,797 $ 48,397 $ 45,668 Donations 0 300 1,792 Employer/Court Fines/Other 89,593 97,650 91,337 Insurance Tax 154,075 154,468 158,596 Local Millage 237,469 246,287 264,086 Adjustment to prioi year 0 0 0 asset value 2 Net Investment Income 877,202 418,145 789,774 TOTAL INCOME $ 1,403,136 $ 965,247 $ 1,351,253 B. EXPENSES 1 Administrative $ 3,000 $ 4,583 $ 3,000 2 Benefits 452,558 452,558 520,122 3 Refunds 0 0 0 TOTAL EXPENSES $ 455,558 $ 457,141 $ 523,122 6 s; 1 1 EXHIBIT 3 (Continued) C ASSETS (at book value) 12/31/1997 12/31/1998 12/31/1999 1 Cash & Checking Accounts $ 0 $ 0 $ 0 2 Bank Deposits 66,202 69,621 244,627 3 Savings and Loan Deposits 0 0 0 4 Other Cash Equivalents 650,784 1,735,365 1,013,861 5 US Govt. Securities 2,184,012 2,226,356 2,110,212 6 Non -US Govt Securities 0 0 0 7 Mortgages 0 0 0 8 Corporate Bonds 2,377,472 2,514,935 2,691,957 9 Common Stocks 5,401,209 4,605,621 5,932,541 10 Other 118,007 153,894 140,725 11 Payables 0 0 0 TOTAL ASSETS D. RATIO OF ASSETS TO ANNUAL EXPENSES: 23.7 -. 24.7 23.2 $ 10,797,686 $ ' 11,305,792 $ 12,133,923 E. NET INVESTMENT RETURN: 8.9% (Book Value Basis) 7 3.9% • 7.0% 1 1 1 1 1 1 1 1. 1 `1 Exhibit 3 (Continued) F. TOTAL MARKET VALUE 1. Market Value, end of year (Used for GASB calculations, page 9) 2. Market Value, beginning of year 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 8,870,878 9,826,212 11,225,602 11,854,130 12,880,300 G. DEVELOPMENT OF ACTUARIAT, VAT.TJF OF ASSETS 1. Actuarial Value of Assets, beginning of year 2. Non Investment Net Cash Flow 3. (a) (b) (c) Development of Investment Income Total Market Investment Income (Fl -F2-32) Amount for Immediate Recognition (6% GI) Amount for Phased In Recognition (G3a-G3b) (d) Phased In Recognition Current year : 20% of 3(c) First Prior Year Second Prior Year Third Prior Year Fourth Prior Year Total Phased In Recognition (e) Actuarial Value Investment Income ( 3(b) + 3(d) ) 4. Actuarial Value of Assets, End of year (1+2+3(e)) Net Investment Return on the Actuarial Value of Assets 8,870,878 9,826,212 11,225,602 11,854,130 8,897,591 9,602,357 10,462,091 11,375,162 108,269 70,376 89,961 38,357 847,065 1,329,014 533,855 . 576,141 313,210 752,873 538,567 987,813 627,725 682,510 (89,158) 305,303 62,642 150,575 _ (17,832) 61,061 0 62,642 150,575 (17,832) 0 62,642 .150,575 0 62,642 0 62,642 213,216 195,385 256,445 596,497 789,358 823,110 938,955 8,897,591 9,602,357 10,462,091 11,375,162 12,352,475 6.7% 8.2% 7.8% 8.2% Note: The Pension Review Board's Board Rule #11 first applies this methodology to determine the Actuarial Value of Assets for the 12/31/99 actuarial valuation report. Different methods were used to determine the Actuarial Value of Assets for the 12/31/98 and earlier reports. 8 1 1 I 1 IS 1 1 1 • 1 EXHIBIT 3 (Continued) ACCOUNTING INFORMATION This page is included to provide the information required by the Govemmental Accounting Standards Board Statement No. 25 and 27, effective January 1, 1998. The values below are based on the assumptions contained in Exhibit 8. The Annual Pension Cost disclosed in this exhibit will almost always differ from the actual cash contribution to the fund. We must emphasize that these disclosures are shown in the city's financial statements; Sound actuarial projections should be used to determine the actual cash contribution requirements. RECONCILIATION OF NET PENSION OBLIGATION (NPO) 1. Actuarially Required Contribution 2. Interest on NPO 3: Adjustment to (1) 4. Annual Pension Cost (1)+(2)-(3) 5. Actual Contribution Made 6. Increase in NPO (4)-(5) 7. NPO Beginning of Year 8. NPO End of Year (a) Actuarial Valuation • Date 12/31/1993 12/31/1995 12/31/1997 12/31/1999 (b) Market Value of Plan Assets* 7,271,255 8,897,591 11,225,602 12,880,300 * Note: ** Note: 1998 292,026 (94,050) (175,639) 373,615 498,405 (124,790) (1,567,498) (1,692,288) REQUIRED SUPPLEMENTARY INFORMATION (c) Entry Age Actuarial Accrued Liability 7,816,034 9,045,983 12,093,450 12,940,843 (d) Unfunded Accrued Liability (UAL) (c) -(b) 544,779 148,392 867,848 60,543 (e) Funded Ratio • (b)/(c) 93.0% 98.4% 92.8% 99.5% 1999 292,026 (101,537) (189,622) 380,111 514,019 (133,908) (1,692,288) (1,826,196) (0 Annual Covered Payroll** 620,116 676,847 608,602 367,188 2000 124,741 (109,572) (251,093) 266,262 (1,826496) (g) UALasa% of Covered Payroll (d)/(f) 87.9% 21.9% 142.6% 16.5% 12/31/93 and 12/31/95 are at amortized cost value. For volunteer/part paid members, Annual Covered Payroll is $200 for such • active members 9 Ner • 1. 1 • 1 1 1 1 1 1 EXHIBIT 4 COMPARISON WITH PRIOR YEARS This exhibit compares current valuation results with those of prior years. Valuation Date Full Paid Active Members Annual No. Payroll 12/31/1982 50 12/31/1984 45 12/31/1986 37 12/31/1987 *' 38 12/31/1989 27 12/31/1991 23 12/31/1993 22 12/31/1995 * 21 12/31/1997 *' 17 12/31/1999 10 810,926 807,438 723,894 788,348 639,962 585,898 620,116 676,847 608,602 367,188 Actuarial Computed Employer Contribution Percent Dollar of Pay Amount Assets 22.1% 27.7% 29.6% 31.3% 36.0% 33.3% 25.2% 25.6% 55.9% 53.7% *Benefits or assumptions changed 179,271 223,455 213,935 246,479 230,328 195,273 156,484 173,401 339,974 197,315 2,202,969 3,078,619 4,006,484 4,460,948 • 5,189,846 5,999,964 7,271,255 8,897,591 10,797,686 12,352,475 Total Plan Unfunded Normal Actuarial Cost Funded Liability Percent Percent 811,186 18.5% 73.1% 1,193,660 22.1% 72.1% 1,379,340 21.8% 74.4% 1,455,161 23.4% 75.4% 1,976,463 26.6% 72.4% 1,427,422 25.5% .80.8% 544,779 25A% 93.0% 148,392 29.8% 98.4% 1,295,764 38.0% 89.3% 588,368 37.7% 95.5% Note: Normal cost prior to 12/31/89 is net of 6% employee contributions. Valuation Date 12/31/1982 12/31/1984 12/31/1986 12/31/1987 * 12/31/1989 12/31/1991 12/31/1993 12/31/1995 * 12/31/1997 * 12/31/1999 Part -Paid/ Volunteer Active Members 1 1 0 0 0 0 0 0 0 0 Actuarial Computed Employer Contribution 10 227 274 0 0 0 0 0 0 0 0 1 1 1 1 IS 1 1 1 1 ,1 EXHIBIT 5 SHORT CONDITION TEST The Arkansas General Assembly has stated that the funding objective for these plans is to pay for benefits with contributions that remain level as a percentage of employee payroll. Thus, the long-term condition test is met when the actual contributions are fairly level and are paid when due. A short condition test can be used to measure a plan's progress Under the short condition test, the fund's assets are compared with: 1) Active member contributions; 2) The liabilities for future benefits to the present retirees and inactive members; 3) The liabilities for service already rendered by active members. If the plan has been following level cost funding, liability (1) and liability (2) above will almost always be fully covered by the rest of the present assets. In addition, liability (3) above will at least partially funded. The larger the funded portion of liability (3), the stronger the condition of the fund.For a closed fund i.e., one like yours, where no new members are admitted), the funded portion of liability (3) should be steadily increasing. The following table illustrates the history of the short condition test for this plan: Valuation Date 12/31/1982 12/31/1984 12/31/1986 12/31/1987 12/31/1989 12/31/1991 12/31/1993 12/31/1995 12/31/1997 12/31/1999 Computed Actuarial Liabilities (1) Active Members Contributions 160,669 236,541 263,129 308,829 274,405 292,477 353,891 418,412 401,937 267,239 (2) Retirees, Inactives, and DROPS 898,272 1,464,696 2,753,772 2,754,276 4,560,672 5,072,169 5,005,131 5,101,995 7,315,705 10,017,182 (3) Actives - Employer Financed 1,955,214 2,571,042 2,368,923 2,853,004 2,331,232 2,062,740 2,457,012 3,525,576 4,375,808 2,656,422 11 Portion of Liabilities covered by Assets Valuation Assets (1) (2) (3) 2,202,969 3,078,619 4,006,484 4,460,948 5,189,846 5,999,964 7,271,255 8,897,591 10,797,686 12,352,475 100% 100% 59% 100% 100% 54% • 100% 100% 42% 100% 100% 49% 100% 100% 15% 100% 100% 31% 100% 100% 78% 100% 100% 96% 100% 100% 70% 100% 100% 78% 1 1 1 1 0 1 1 1 1 • A Exhibit 6 Employee Profile Employee data needed for the valuation was obtained from the records fumished by the Arkansas Fire and Police Pension Review Board. The following table shows a detailed breakdownof the present participants by the number of participants and total salary. Actives Years of Service 0-5 5-10 10-15 15-20 20-25 25-30 30 and Over Total Under 25 Count 0 0 Salary 0 0 0 0 0 0 0 0 0 0 0 0 '• a c A¢ loi 25-29 Count 0 0 Salary 0 0 0 0 0 0 0 0 0 0 0 , 1 w', 4i 30-34 Count 0 0 0 0 0 0 0 0 0 0 0 0 0 O pi" $ ;0 Sal Salary 35-39 Count 0 0 0 0 0 0 0 a*Ofi Salary 0 0 0 0 0 0 40-44 Count 0 D 0 6 2 0 of it Salary 0 0 • 0 197,724 72,780 0 0 270;504? 45-49 Count 0 0 0 1 0 0 0 al Salary 0 0 0 36,582 0 0 0 ;;,«308.2. 50-54 Count 0 0 0 0 0 0 0 n 0 Salary 0 0 0 0 0 0 0 S , xor 55-59 Count 0 0 0 0 0 0 1�� 1 rt Salary 0 0 0 0 0 0 60,104 ta.� 0,104 ; 60-64 Count 0 0 0 0 0 0 0 3 0i Salary 0 • 0 0 0 0 0 0 65 & Count 0 0 0 0 0 0 0 `w, J O Over Salary 0 0 0 0 0 0 0 ;,,. k0; Unknown Count 0 0 0 0 0 0 0" 0' Age Salary 0 0 0 0 0 0 0 �R .3i 01. Total Count e0 Vwt( ' , t 0 ' "7 2 o- YDs 3 ,s ll Salary .fl '°a rZ 0, ; fJot 234306 7,200 O,st L60,404 367;190? . 12 • I• 1 1 1 1 1 1 IS 1 1 Are Exhibit 6 Employee Profile Employee data needed for the valuation was obtained from the records furnished by the Arkansas Fire and Police Pension Review Board. The following table shows a detailed breakdown of the present participants by the number of participants. Volunteers/Part-Paid Actives Years of Service 0-5 5-10 10-15 15-20 20-25 25-30 30 and Over Total Under 25 Count 0 0 0. 0 0 0 0 ILa", tP 25-29 Count 0 0 0 0 0 0 0 0 30-34 Count 0 0 0 0 0 0 0 d '' .0;7 35-39 Count 0 0 0 0 0 0 0 ; "0 ., . «, 1 40-44 Count 0 0 0, 0 0 0 0 °W 01' 45-49 Count 0 0 0 0 0 0 0 ;; '0: 50-54 Count 0 0 0 0 0 0 0 •. ^0' 55-59 Count 0 0 0 0 0 0 0 0F 60-64 Count 0 0 0. 0 0 0 0 t!� 0' 65 & Over§,, Count 0 0 I 0 0 0 0 0 Cly ; .0 t' Unknown Age Count 0 0 0 0 0 0 00'i id y Total Count r ire. 1 0; " - 10y fi€?7'"N `' 0? � 0 0 F t F^ v.0t" �'('el+,{l R, OF ♦�T'-w �SR4 N.4 13 1 i1 1 1 i Age Exhibit 6 Inactive Profile Employee data needed for the valuation was obtained from the records furnished by the. Arkansas Fire and Police Pension Review Board. The following table shows a detailed breakdown of the present payees by the number of payees and total annual benefit. Retirees and Survivors Years Since Retirement 0-1 1-2 2-3 3-4 4-5 5-10 10 and Over Total Under 40 Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 i0 Ill 40-44 Count Benefit 0. 0 0 0 0 0 0 0 0 0 0 0 0' 0 ';:. a0i p4,r`" 0' 45-49 Count Benefit 1 23,705 0 0 0 0 0- 0 0 0 1 5,014 0 0 v 21 28i719j: 50-54 Count Benefit 0 0 0 0 0 0 0, 0 0 0 4 61,295 4 58,453 +r* 1119;7484 t84 55-59 Count Benefit 0 0 0 0 0 0 0. 0 0 0 3 33,454 7`<1'0� 107,278 1340;7321 60-64 Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 6 ' 6 53,725 X$3;725 65-69 . Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 7 1 64,378r�..;•64;37u84 k17: Oki 70-74 Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 3 12,396 �3� alt 12 396`1, 75-79 Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 8 26,118 '81 ,"26,118,,1 80-84 Count Benefit 0 0 0 0 0 0 0' • 0 0 0 0 0 8" 14,370 "13.A ' T,437O} 85 & Over Count Benefit 0 0 0 0 0 0 0 0• 0 0 0 0 4 14,460 41 4;4601 �k 4 t Unknown Age Count Benefit 0 0 0 0 0 0 0 0 0 0 0 0 0 u 0 a 7"�Oi 0 Total Count Benefit A Y it , 23,1;744$. " brie 0 4 S i 4 t �� i pyt tLidU� Yi 0v' , y� 0, . " �� �2 1 �'t0 ,., 9 i O. ii ;p 91763 , gk 4 3351 ;8 VA* ; :0 This includes This includes This includes 39 retirees with annual benefit of $368,861 . 5 disableds with annual benefit of $56,403 . 12 survivors with annual benefit of $49,382 . 14 e ti1 1 1 1 j 1 1 1 1 '1 Exhibit 6 Deferred Retirement Option Plan Profile Employee data needed for the valuation was obtained from the records furnished by the Arkansas Fire and Police Pension Review Board. The following table shows a detailed breakdown of the current participants on DROP by the number of participants and total annual DROP benefit. Age DROP Participants Years Since Electing DROP 0-1 1-2 2-3 3-4 4-5. 5-10 Total Under 40 Count 0 0 Benefit 0 0 0 0 0 0 0 0 0 0 , :',, 0 40-44 Count 1 0 Benefit 20,835. 0 0 0 1: 25,555 0 0 0Nlia4' 0 i.�1 �F 40;_3.90.; 45-49 Count 2 2 Benefit 54,685 49,350 0 0 1 24,510. 0 0 0 0 5 128;5451 50-54 Count 1 . 1 0 1 0 0 Benefit 29,093 30,605 0 19,916 0 0 . , 9.56.k41.1 55-59 Count 0 0 0 0 0 0 *''0' Benefit 0 0 0 0 0 0 60-64 Count. 0 0 0 0 0 0Fri 0 Benefit 0 0 0 0 0 0,+. e,0 65-69 Count 0 0 0 0 0 0 '0; Benefit 0 0 0 0 0 0 .,4t ?' 6 70-74 Count 0 0 0 0 0 0 t 0' Benefit 0 0 0 0 0 0 75 & Count 0 0 0 0 0 0^ "0 ea, Over Benefit 0 0 0. 0 0 0 Jnlmowr Count 0 0 0 0 0 0`�4 0 Age Benefit 0 0 0 0 0 0 0 Total Count r. AO A.3°c D ar „t0 10 Benefit1'04;6131 LJt;79,9551 ,..% � 69,981 a ,1 0 ,; , 0 'x 2541549° 15 1 1 1 1 1 1. 1 1 1 1 • 1 EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN EMPLOYEE Member of Fire Department EMPLOYER Fayetteville Fire Department MEMBERSHIP Condition of Employment. Firefighters hired after 1982 must join the statewide Local Police and Firefighters Retirement System CREDITABLE SERVICE Determined on basis of service since employment CONTRIBUTIONS Employee 6.00% of salary. Volunteers contribute $12/year. Refundable if member terminates before retirement eligibility. Employer 1. Matching contribution equal to employee contribution 2. State Insurance Premium Tax turnback 3. Local Millage FINAL SALARY Salary attached to the rank of the member at time of retirement, based on regularly scheduled work -week. DEFERRED RETIREMENT OPTION PLAN ., RETIREMENT BENEFITS Eligibility Benefit This plan has elected to participate in the Deferred Retirement Option Plan effective January 25, 1996. Members who elect to participate have a DROP account that is increased by the monthly amount of their retirement as if they had retired as of the date DROP was elected. -Has not elected coverage under Act 1457 of 1999. 20 Years of Service regardless of age. 65% of Final Salary, but not less than $4,200. ($660/year for volunteer/part- paid). If service exceeds 20 years, the annual benefit is increased by $240 for each year over 20, up to $1,200/year extra. ($120 for each year over 20 up to $600/year for volunteer/part-paid). If service is more than 25 years, member receives an extra 1.25% (for each year over 25) of Final Salary, payable once the retiree reaches age 60. The benefit cannot exceed 100% of Final Salary. 16 e EXHIBIT 7 (Continued) DEATH BENEFITS Eligibility Death before 20 Years of Service not occurring while performing work in gainful employment outside the fire department, or death after 20 years. Benefit DISABILITY BENEFITS 1. Widow receives same amount as member is receiving or eligible for. 2. Each child under age 19 receives $1,500/year. ($300/year for volunteer/part-paid). Eligibility Permanent physical or mental disability not acquired while performing work in gainful employment outside the fire department. Benefit Full Paid Non -duty disability Retirement benefit but not less than $4,200/year. Full Paid Duty related disability Retirement benefit but not less than 65% of Final Salary and not less than $4,200/year. Volunteer/Part-Paid: Computed as voluntary retirement benefit 17 • 1!• 1 1 1 1 1 1 1 1 1 1 '• 1 EXHIBIT 8 ACTUARIAL METHODS AND ASSUMPTIONS The assumptions for this valuation have been selected in accordance with Actuarial Standards of Practice No. 27. The asset valuation method is prescribed in Arkansas Code Annotated 24-11-207 to be the amortized cost method. This prescribed asset valuation method directly impacts the investment return assumption. The assumed salary growth is restricted by A.C.A. 24-11-205 in relation to the investment return assumption. ACTUARIAL COST METHOD PRE -RETIREMENT MORTALITY POST RETIREMENT MORTALITY VOLUNTARY TERMINATIONS The "entry age normal' cost method has been used. Deaths have been projected on the basis of the 1971 Group Annuity Table for Males, set back five years for females. Mortality rates at a few sample ages are: Agg 25 35 45 55 Mortality rate Der 1.000 0.619 1.122 2.922 8.519 The 1971 Group Annuity Mortality Table was used. For females, the male table was used with a five-year setback. The life expectancy according to this table is as follows: Age Males Females 55 22.71 27.99 65 15.11 19.24 Annual termination rates at a few sample ages are. Age Termination rate per 1.000 20 40 25 35 30 29 35 15 40 6 45 5 50 5 55 5 18 • 1 1 0 1 1. 1 1 1 1 1 '• 1 • gXHIBIT 8 (continued' When a person had Less than 4 years of service, we assumed that his chances of voluntary termination were a multiple of thereafter rates, with the following multiples being used: 1st year 2nd year 3rd year 4th year ASSUMED INVESTMENT RETURN 6.0% 2.85 2.00 1.50 1.15 DISABILITIES .We continued the disability rates used in prior reports. Disability rates at a few sample ages are: ASSET VALUATION Age Disability rate per 1,000 20 0.8 25 0.8 30 0.8 35 0.8 40 2.0 45 2.6 50 4.9 55 8.9 60 14.1 One third of the disabilities were assumed to be service related. For mortality after disability, we assumed rates based on the Eleventh Actuarial Valuation of the Railroad Retirement System, for occupational disabilities When Book Value < 5,000,000, use Book Value. Otherwise, use the Smoothed Asset Valuation defined in Board Rule # 11 and developed on page 8 of this report; Market Value was used for GASB. 19 Alt 1 1 1 1 1 1 i 1. 1 . 1 1 ,• 1 EXHIBIT 8 (continued) _ SALARY GROWTH We have used the salary scale used in prior reports. Annual assumed growth at a few sample ages is: ANNUAL Age - Base 20 4.0% 25 4.0% 30 4.0% 35 4.0% 40 4.0% 45 4.0% 50 4.0% 55 4.0% 60 4.0% SALARY Merit 4.0% 3.2% 2.8% 2.5% • 2.2% 1.7% 1.2% 0.7% 0.2% INCREASE Total 8.0% 7.2% 6.8% 6.5% 6.2% 5.7% 5.2% 4.7% 4.2% EXPECTED RETIREMENT AND DROP Since the plan allows full benefits at ages younger than the PATTERN traditional "65", an assumption that will have an important impact is what percentage of people who are eligible for this early retirement will actually take advantage of it. This will depend on intangible things such as the economy, health, financial ability to retire, Social Security eligibility, and work patterns. Based on recent experience, we are using the following assumed rates, effective 12/31/93: Retirement_ rate per 1,000 Age Retirement DROP 40-59 100 60+ 1,000 Note: 20 200 0 A member was assumed to be eligible for retirement or DROP after attaining age 40 with 20 years of service. It is also assumed that twice the normal number will retire or elect DROP in the first year of eligibility. 1i1 1 1 1 1 i i 1 1 1 1 1 1 1 t EXHIBIT 8 (continued) -RETIREMENT PATTERN AFTER Once a person is on DROP (Deferred Retirement Option Program), ELECTION OF DROP they were assumed to retiree from the department as follows: Years on DROP Retirement rate per 1,000 1 100 2 200 3 200 4 300 5 or more 1,000 21 Ilk